Global economic growth has reached a turning point with a slowdown now clearly under way, led by the United States, the World Bank said today.
In its annual Global Economic Prospects report, the World Bank said global growth would likely reach 5.1 per cent this year, slow to 4.5 per cent in 2007, then rise slightly to 4.6 per cent in 2008.
It said developing countries were in the driving seat, with growth reaching 7 per cent in 2006, twice as fast as developed countries, then slowing to 6.4 per cent in 2007 and 6.1 per cent in 2008.
In comparison, developed economies would expand by 3.1 per cent this year, slow to 2.4 per cent in 2007 and strengthen to 2.8 per cent in 2008.
"The gap between developing countries and high income countries is widening," World Bank economist Hans Timmer told reporters. "Developing countries are able to accelerate while high income countries are not doing that," he added.
He said growth in the world's developing countries would remain strong, boosted by improved policies and favorable financial conditions.
The report said a soft economic landing remains likely, but warned that a cooling housing market in the United States could spark a sharper-than-expected downturn and even a recession, which would have significant effects on developing nations.
It said much slower growth would cause commodity prices to weaken, potentially placing many developing countries that have so far avoided current account problems in difficulty.
The World Bank said so far inflationary effects of rapid economic growth had been largely confined to markets for global goods, such as commodity sectors.
"The inflationary response at the national level has been remarkably muted," it said.
But it warned that if measures to slow growth in key developing nations such as China, Argentina and India fail, inflation in those countries could pick up.